BP agrees to historic settlement over US oil spill

British petroleum titan BP announced on Thursday that it had agreed to pay a record $18.7 billion (16.9 billion euros) in damages to the US government and five states, five years after the company's Deepwater Horizon rig exploded in the Gulf of Mexico, killing 11 people.

The settlement includes a $7.1-billion (6.4 billion euros) payment to the federal government plus the states of Alabama, Florida, Louisiana, Mississippi and Texas, to be paid over 15 years. The five Gulf states would also receive an additional $4.9 billion to settle "economic and other claims," which would be paid over 18 years, BP said in a statement.

Closure

If the deal is approved, it would close the chapter on what is likely the darkest moment in BP's long history.

"With this agreement we provide a path to closure for BP and the Gulf," said company chairman Carl-Henric Svanberg on Thursday.

"For BP, this agreement will resolve the largest liabilities remaining from the tragic accident and enable BP to focus on safely delivering the energy the world needs. For the United States and the Gulf in particular, this agreement will deliver a significant income stream over many years for further restoration of natural resources and for losses related to the spill."

Calculating the costs

In addition to human lives, the 2010 disaster laid waste to huge swaths of wetlands, wildlife and fisheries, as an estimated 4.9 million barrels of oil gushed into the Gulf, spreading as far as 3,200 square kilometers (1,235 square miles) from the well site off the coast of Louisiana.

The local fishing and tourism industries were particularly hard-hit. Oil-covered beaches and steep drops in fish and oyster catch forced several businesses and fishermen out of business. BP spent upwards of $100 million on PR pushes in the affected states to help them win back customers scared off by reports of sullied seafood and clogged coastlines.

It took BP 87 days to cap the well some 1.5 kilometers (5,000 feet) below sea level. Some 800,000 barrels were eventually captured, but the company was still held responsible for spilling 3.1 million barrels. It has calculated spill response costs, including clean-up efforts, at more than $14 billion and 70 million personnel hours.

'Manageable' impact

The size of the settlement was slightly more than the $17.6 billion that investors had feared BP would be fined under the US Clean Water Act for gross negligence.

But the firm's chief financial officer, Brian Gilvary, sought to allay such fears, assuring shareholders that "the impact of the settlement on our balance sheet and cashflow will be manageable and enables BP to continue to invest in and grow its business."

New beginning?

The US government welcomed the deal as unprecedented.

"If approved by the court, this settlement would be the largest settlement with a single entity in American history," US Attorney General Loretta Lynch said in a statement.

She continued to say that "it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife, and it would bring lasting benefits to the Gulf region for generations to come."

The White House also praised the settlement:

"While we have not had a chance to review this agreement in detail, we are pleased to see that this historical agreement will help repair the damage done to the local economies of the Gulf and to the wetlands, wildlife and fisheries impacted so severely by the Deep Water Horizon spill," spokesman Eric Schultz told reporters traveling with US President Barack Obama on the Air Force One.

Louisiana Governor and Republican presidential candidate Bobby Jindal was also quick to jump on news of the agreement to highlight potential perks: "This agreement will not only restore the damage inflicted on our coastal resources by the Deepwater Horizon oil spill, it will also allow Louisiana to continue aggressively fighting coastal erosion."

pad/jr (AFP, Reuters, dpa, AP)